Asia energy stocks hit by oil sell-off, eyes on Yellen

HONG KONG: Asian energy firms suffered further losses on Thursday after another sharp fall in oil prices, while currency traders moved cautiously the day before a key speech by Federal Reserve boss Janet Yellen.

World markets have struggled to gain traction this week with few catalysts to spur business ahead of Yellen’s talk at the annual Jackson Hole symposium of global central bankers.

Oil was hammered Wednesday on data showing a surprise jump in US stockpiles last week, with West Texas Intermediate shedding 2.8 per cent and Brent down 1.8 per cent. WTI has now lost almost five per cent since the end of last week while Brent has slipped 3.6 per cent.

The losses come after a seven-day oil rally that saw it enter a bull market — a 20 per cent rise from recent lows — on hopes for an output limit deal at a meeting next month between key producers including the Opec cartel and Russia.

Comments to AFP from key Opec member Iran that it had yet to take any decision on agreeing to a ceiling, or even on taking part in the meeting, also weighed on buying sentiment.

But bargain-buying helped both contracts make small gains on Thursday, with WTI up 0.2 per cent and Brent 0.1 per cent higher.

The softening through to energy oil prices filtered firms across the region, with CNOOC and PetroChina in Hong Kong sinking, although earlier sharp losses were pared. Japan’s Inpex and JX Holdings were each down more than 1.5 per cent and Sydney-listed Rio Tinto and BHP Billiton also suffered heavy falls.

On broader equity markets Tokyo ended the morning 0.3 per cent lower, Shanghai closed down 0.6 per cent while Hong Kong ended marginally higher. Sydney gave up 0.4 per cent, and Seoul closed marginally lower.

“Global markets have rallied over the past seven weeks, but those gains have looked increasingly exhausted over the past three,” James Woods, a strategist at Rivkin Securities in Sydney, said.

“We are certainly due for a pullback. That being said, I don’t expect declines to be too large.”

The main focus this week is on what Yellen has to say at Friday’s gathering in Wyoming, with traders hoping for some idea about the Fed’s thinking on monetary policy and its plans for any possible interest rate hike.

As such currency markets are relatively quiet, with the dollar barely moved against its main rivals.

“Everybody is waiting for Yellen, and I’m not sure whether Yellen will provide the impetus all traders are looking for,” Nicholas Teo, a strategist at KGI Fraser Securities in Singapore, told Bloomberg News.

“The Fed rhetoric so far has been balanced although the last two weeks we’ve seen quite hawkish comments.”

European stocks slid on Thursday in choppy trade as investors eyed poor German data and recent oil price falls, on the eve of a speech by Federal Reserve boss Janet Yellen.

In late morning deals, Frankfurt sank 1.0 per cent, London lost 0.3 per cent and Paris shed 0.8 per cent in value. The European single currency however rose against the dollar.

“What we are seeing today is another example of what we’ve seen for the last week, choppy markets that are lacking any real direction due to a total lack of catalysts,” Oanda analyst Craig Erlam said.

“It’s been a particularly quiet week for Europe on this front and combine this with the quiet summer period and the caution ahead of tomorrow’s Jackson Hole speech from Janet Yellen — although this is a bigger event for US markets — and it’s not entirely surprising that we’re currently caught in these choppy conditions.”

Markets had been partly buoyed Wednesday by news that the German economy grew by a better-than-expected 0.4 per cent in the second quarter.

However, German business confidence made a steeper fall in August than expected, slipping to its lowest level since December 2014, the Ifo economic institute revealed on Thursday.

Its closely-watched index fell to 106.2 in August — well below the 108.5 predicted by analysts surveyed by Factset — from its July level of 108.3.

“This appears to be a delayed negative reaction to the UK referendum decision of 23 June to leave the European Union,” noted IHS Global Insight economist Howard Archer. World markets have struggled to gain traction this week with few catalysts to spur business ahead of Yellen’s talk on Friday at the annual Jackson Hole symposium of global central bankers.